Bharti in talks with Wal-Mart for rolling out front-end stores

Bharti Enterprises is in talks with its US partner Wal-Mart for rolling out front-end stores after the relaxation of FDI norms in retail and it wants the government to remove the differentiation in sourcing rules between single and multi-brand segments.

The company also feels big multi-brand retailers will not sound the death knell of small kirana stores as both formats can co-exist.

"Discussions are on the way. Nothing conclusive has come around to speak as of now on that," Bharti Enterprises Vice Chairman and MD Rajan Bharti Mittal told PTI when asked if Bharti has firmed up plans with Wal-Mart for retail stores. But he ruled out any problems on this score.

The two companies have an equal partnership in wholesale business and the Indian partner is hopeful of replicating it in the retail business, following government's decision to allow up to 51 per cent FDI in multi—brand retail.

"When 100 per cent FDI was allowed in the back-end and the wholesale, we went for a 50:50 relationship. So what has been allowed by the government is not imperative that it will follow, but those discussions are happening. They are in the process," he said.

Asked how soon can the two partners start rolling out joint retail stores in India, Mittal said: "India is a big country so in any case it takes time to roll out, you can't do it in a day. Not only us but also other people in this game and scale, once you start moving into that direction it can take 12-15 months to start getting some action on the ground."

When asked about the different sourcing norms for FDI in single and multi-brand retail, Mittal said there should be equal treatment.

"You should say source from India. Manufacturing has to increase, so source from India.

Why from MSME?... If tomorrow our belief is that we need to buy from India then no problem, we will do that but expand the scope. All I am saying is that from a larger picture we should say please buy from Indian manufactured companies," Mittal said.

After battling stiff opposition, government had last month allowed 51 per cent foreign investment in multi-brand retail but left it to the states to permit global retailers open stores.

It had also tweaked the sourcing norms for FDI exceeding 50 per cent in single brand retail requiring foreign firms to source 30 per cent from India 'preferably' from MSMEs as against the earlier condition of mandatory sourcing the same from MSMEs. Multibrand retailers, however, will have to source 30 per cent from MSMEs.

Swedish furniture retail giant IKEA had led the opposition to the mandatory 30 per cent sourcing from MSMEs.

"Domestic sourcing must also include co-operatives because they are like MSME from our point of view... If this platform succeeds, there will be people who will buy from you. He will have to expand. What he'll do, he will have to create 20 companies to keep them MSME," Mittal argued.

When asked if foreign retailers' entry will lead to death of kirana stores, he replied in the negative.

"Nobody has been able to give us an answer that the Indian retail giants have not in the last 10 years destroyed kirana stores, why an FDI will destroy it?" he questioned.
On the contrary, he said the number of modern retail outlets have gone down in the recent past to about 4,800 from 5,400 stores earlier.

"India is a country but it is so diverse. So what is so special about FDI that they are opposing it. So I am saying put a cut-off say 2,000-2,500 square feet, we will not allow you below this. It is good experimentation position for them as well," he said on safeguarding small kirana stores.

With the government leaving the final say to the states for allowing the MNC retail giants to set up shop, many non-Congress ruled states are opposing multi-brand FDI.

Commenting on the states' reservations, Mittal said: "Some states have opened up, they'll start seeing the results, other states will also eventually (allow)."

He said that there were similar reactions in the past when privatisation of telecom, airlines and airports took place.

"...all privatisation goes through this, so I think all liberalisation goes go through this process," he added.